Germany targets zero growth in 2024 as IMF says all other G7 economies are recovering

Germany appears to be the worst developed economy in the world for the second year in a row.

In its latest World Economic Outlook report, the International Monetary Fund (IMF) predicts that there will be no growth at all in Germany this year.

This follows a contraction of 0.3 percent last year and cements the country’s status as the “sick man of Europe”.

Stagnant: In its latest World Economic Outlook report, the International Monetary Fund predicts that there will be no growth at all in Germany this year

All other countries in the Group of Seven major industrialized nations – made up of the United States, Canada, the United Kingdom, Germany, Italy, France and Japan – are growing.

The IMF has raised its growth forecast for the UK for this year to 1.1 per cent, after predicting just 0.5 per cent in April. UK growth is also expected to accelerate, to 1.5 per cent, in 2025, “as falling inflation and interest rates boost demand”.

The report warns of “persistent weakness in the manufacturing sector” in Germany and Italy. But while Italy benefits from the EU’s £1.7 trillion Covid-19 recovery fund, Germany “is under pressure from fiscal consolidation and a sharp fall in property prices”.

Germany’s once-mighty industrial sector has long been the engine of the euro zone’s most powerful economy.

But it relied heavily on cheap Russian gas and has been plunged into crisis since the 2022 invasion of Ukraine sent energy costs soaring.

Household spending also remains depressed as political instability takes its toll with Chancellor Olaf Scholz’s conflict-torn government.

The country’s huge auto sector is in crisis due to the shift to electric vehicles, a market where it struggles to compete with cheap imports from China.

Latest IMF forecasts revealed at its annual meeting

in Washington. The intergovernmental group left its global growth outlook unchanged for this year at 3.2 percent and lowered it from 3.3 percent to 3.2 percent for next year.

On the positive side, Pierre-Olivier Gourinchas, the IMF’s chief economist, said the world was overcoming the cost-of-living crisis that has strained consumers over the past two years.

“It appears that the global battle against inflation has largely been won,” Gourinchas said yesterday, “even if price pressures persist in some countries.”

With inflation now “close to central banks’ targets”, interest rates should start to fall, he suggested.

Gourinchas said the fact that this was achieved without triggering a global recession was a “major achievement”.

But he also warned that “downside risks are increasing and now dominate the outlook.”

Gourinchas highlighted the risk of conflict in the Middle East leading to higher oil prices, as well as interest rates remaining high for too long and “undesirable trade and industrial policies” – code for high tariff barriers. , a policy favored by US presidential candidate Donald Trump. .

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